SOAK-THE-RICH STRATEGIES BACKFIRE IN STATE AFTER DEFICIT-RIDDEN STATE
October 8, 2009
When David Paterson became governor of New York, he shocked New Yorkers by declaring that taxes were too high and that he had many friends who had left the state because there were better opportunities elsewhere. New York had to grab control of its spending rather than continue raising taxes, said the former state senator with a long tax-and-spend track record, in what amounted to the equivalent of ideological heresy.
Paterson quickly got rolled by the big-government wing of his own party, which passed a budget for this year with $6.1 billion in projected new taxes and fees, led by sharply higher rates starting for those earning more than $200,000 a year.
Asked if the budget made sense in the recession, an outgunned Paterson said: "None of this makes sense."
- Revenue from tax increases was running 20 percent below projections and that, in particular, the wealthy were not paying up.
- So far, the state had only collected about half of an expected $1 billion in income tax revenues from the state's wealthiest residents.
"You heard the mantra, 'Tax the rich, tax the rich,'" Paterson said. "We've done that. We've probably lost jobs and driven people out of the state."
In a story about New York's tax woes, the Associated Press noted that other states that had enacted so-called millionaires' taxes (most of which, like New York's, start well under $1 million in annual income) were squirming upon hearing the New York numbers. Actually, some of these states have been squirming for a while, says Steven Malanga, a Senior Fellow with the Manhattan Institute.
New Jersey enacted its millionaires' tax in 2004:
- Pitched by the state's unions as the cure for Jersey's budget woes, the state collected $9.5 billion in personal income taxes in fiscal 2005.
- Last year, four budget cycles later, the state collected only $10.3 billion, and this year it's estimating just $9.4 billion from the same tax.
- Revenues have fallen so far below projections that Jersey has actually had to cut its spending (not just its rate of spending, like most states) by more than $3 billion this year despite $2 billion in federal stimulus aid for the state budget.
- And even so, Jersey had to skip payments to its pension system.
Source: Steven Malanga, "Soak-The-Rich Strategies Backfire In State After Deficit-Ridden State, Investor's Business Daily, October 8, 2009.
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